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City sued over tax incentive program

By Associated Press DON BABWIN (AP)

March 22, 2013

CHICAGO (AP) — The agency that oversees mass transit in the Chicago area filed another lawsuit Friday against Kankakee, the latest volley in a legal battle over that city’s effort to attract businesses with tax incentives that the Regional Transportation Authority contends are costing it tens of millions of dollars.

In a news release, the RTA, which relies on sales taxes for funds, said it has filed a lawsuit in Cook County alleging that Kankakee is violating the state’s open records law by refusing the RTA’s requests for records of any agreements that Kankakee “has with companies engaging in these schemes.”

Kankakee’s assistant city attorney said he had not yet seen the lawsuit but that the city has complied with the RTA’s requests for information under the state’s Freedom of Information Act.

“We have responded to every request under FOIA that they’ve sent us,” said L. Patrick Power. “They may not like our answer, but we comply.”

Also, he said, after the RTA and the city of Chicago filed lawsuits against Kankakee and the tiny community of Channahon over tax incentive programs, Kankakee disclosed in court filings information about its own agreements with businesses.

In those lawsuits, the RTA and Chicago alleged that the incentive programs are costing other government agencies money because they let companies avoid paying higher sales taxes by moving purchases through satellite offices in outlying communities where the sales tax rates are lower.

Kankakee officials say their programs are perfectly legal. On Friday, Power said that if businesses are relocating from Chicago, it’s because sales taxes there are far higher.

“They’ve driven every business out of the state, at least out of Cook County and Chicago, (and) because they’ve driven everybody away and gone somewhere else it’s other people’s fault,” Power said.

The RTA’s effort to recoup what it says is a loss of tens of millions of dollars in tax revenue has also included a lawsuit against United Airlines. The RTA alleges the company falsely claims to buy jet fuel in the rural community of Sycamore to skirt millions of dollars in sales taxes. The agency also accuses American Airlines of setting up a similar “sham” office in Sycamore but has said it would wait until the airlines emerges from bankruptcy to file a lawsuit.

Both airlines have defended their operations, with United saying it buys fuel in Sycamore and American saying it complies with state law.

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